• Sharp GDP correction forces AUD lower
    on September 3, 2020 at 12:00 am

    AUD - Australian Dollar The AUD drifted lower through trade on Wednesday amid weaker than anticipated Q2 GDP data and a sustained USD bear market bounce. Second quarter GDP data showed the economy contracted at its fastest pace on record, plunging 7%, well beyond market estimates at 6%. Analysts had anticipated a sharp adjustment as the country grappled with the effects of COVID-19 imposed lockdowns but the larger than expected decline suggests the RBA will need to do more to fuel the economic recovery with a return to pre-covid levels not expected until at least 2023. The AUD slipped below 0.7350 to touch intraday lows at 0.7301 overnight as the USD found renewed support, bouncing of 28 month lows to outperform all major counterparts. Having failed to extend beyond resistance at 0.74/0.7410 we expect the AUD will fluctuate between support and resistance, bouncing off 0.7260 while retreating on moves approaching 0.74 ahead of a new catalyst to drive direction. With little of note on today’s docket attentions turn to US non-farm payroll data Friday as a key marker into the weekly close. Key Movers The USD outperformed major counterparts through trade on Wednesday, bouncing off 28 months lows. The BBDXY was up 0.5% on the day despite weaker than anticipated leading employment data. ADP non-farm payrolls rose at half the pace expected, opening the door to a softer NFP print on Friday. The Euro retreated Wednesday slipping back below 1.19 to touch 1.1825. Having touched 1.20 early this week profit taking and a correction in long positions forced the single currency lower, while a fall in European interest rates helped fuel USD yield support. Attentions now turn to Fridays US non-farm payroll print. While there are some signs the US economy is recovering, gains are modest and well below pre-covid levels. With new infection rates still alarmingly high and fiscal support wanting we expect the USD downtrend will resume in the weeks and months ahead. Expected Ranges AUD/USD: 0.7260 - 0.7410 ▼ AUD/EUR: 0.6080 - 0.6230 ▲ GBP/AUD: 1.8020 - 1.8480 ▲ AUD/NZD: 1.0780 - 1.0920 ▼ AUD/CAD: 0.9480 - 0.9630 ▼

  • AUD falters on break above 0.74
    on September 2, 2020 at 12:00 am

    AUD - Australian Dollar The Australian dollar failed to extend gains beyond 0.74 US cents through trade on Tuesday amid profit taking and a USD bear market bounce. Having touched intraday day highs at 0.7410 the AUD drifted lower through the latter half of the domestic session and overnight as investors looked to square positions having marked a fresh 2-year peak. Investors largely ignored the RBA rate statement and policy announcement having priced in maintenance of the current policy platform. The RBA offered little beyond its recent commentary affirming its commitment to the current program, maintaining it is appropriate in the current environment if supported by ongoing fiscal stimulus. Despite the US dollar correction, we expect the broader AUD uptrend will continue through the months ahead. Having lost its interest rate incentive there is little demand for the world’s base currency, underpinning the AUD rebound. With iron ore prices expected to remain elevated and broader risk sentiment positive the Aussie dollar is poised for a break toward 0.75. Attentions today turn to a Q2 GDP data print. Expectations are for a sharp correction in growth between 5% and 6% as the economy struggled to grapple with the impacts of nationwide social distancing restrictions. A read at or near this level will likely have little impact on the currency, instead investors will be attuned to Q3 and Q4 performance as indicators of a rebound in economic activity. Watch the AUD trade between 0.7260 and 0.7420 Key Movers The US Dollar crept higher on the day through Tuesday bouncing off 28-month lows amid a short-term profit taking. The world’s base currency remains under pressure with markets finding little incentive to reverse the recent trend. Despite yesterday bear market bounce we anticipate the dollar will continue its downward trajectory as market grapple with an extended period of ultra-loose monetary policy. The Euro tested 1.20 Tuesday touching intraday highs at 1.2010 before shifting lower on US bear market demand. The Euro remains the primary benefactor of US dollar weakness, continuing its 2-month upturn to touch 28-month highs. Having failed to hold onto gains we expect ongoing resistance on moves approaching the key psychological handle. Attentions today turn to preliminary US non-farm payroll numbers and commentary for Bank of England Governor Andrew Bailey. With Sterling largely flat through the last 24 hours investors will be keenly attuned to any commentary that suggests further monetary policy easing is imminent. Expected Ranges AUD/USD: 0.7260 - 0.7420 ▼AUD/EUR: 0.6080 - 0.6230 ▲GBP/AUD: 1.7080 - 1.8420 ▲AUD/NZD: 1.0850 - 1.1020 ▼AUD/CAD: 0.9550 - 0.9680 ▼

  • AUD touches fresh two year high as US dollar downturn deepens
    on September 1, 2020 at 12:00 am

    AUD - Australian Dollar The Australian dollar marked fresh year to date highs through trade on Monday, extending Friday’s gain and testing 0.74 US cents. In what was largely a quiet start to the week, with little headline data on hand and a distinct lack of market moving newsflow the AUD maintained its upward momentum extending gains beyond 0.73 amid ongoing US dollar softness. The Federal Reserve’s ultra dovish monetary policy platform and forward outlook continue to weigh on the world’s base currency allowing the AUD to continue its upward push. Having broken resistance at 0.7260 and the trading pattern between 0.7130 – 0.7260 the door is open for the AUD to extend its advance toward 0.75. With resistance forming on moves approaching 0.74, a consolidated break above this handle is needed if momentum is to be maintained. Attentions now turn to the RBA and its monthly policy meeting. We expect policy makers will maintain the current program of bond buying and yield management while leaving rates on hold at 0.25%. The RBA, in recent communications, has reiterated its commitment to the existing program, judging the current package as appropriate for the current environment, while leaving the door open to loosen policy further and lower borrowing costs to stimulate the recovery if need be. With few surprises expected we anticipate the AUD will continue to meet resistance at 0.74 ahead of tomorrow’s GDP print. Key Movers The US dollar depreciation continued through trade on Monday, marking a fresh two year low to close the month 1.5% lower. The fourth straight monthly depreciation is the longest run of losses in three years and a clear signal there is little appetite for the world’s base currency. The Federal Reserve doubled down on its ultra-dovish monetary policy platform last week, amending its inflation management system and opening the door to an extended period of record low interest rates. With the FOMC reinforcing its bearish stance there is little scope for a near term dollar recovery. The Euro continued its monthly advance pushing back through 1.19 to touch daily highs at 1.1960. The single currencies advance coincides with the dollars depreciation as investors shift focus away from the greenback in an attempt to chase a higher yield on expectations Europe will recover from the Coronavirus faster that the US. Having met resistance on approaches to 1.20 the resurgence of a second wave in infections is weighing on the Euro as the threat of reinstated lock down measures loom larger. The Yen was the softest of the majors drifting lower against the USD and giving up gains won last week. The USD pushed back toward 106, touching intraday highs at 106.10 before correcting lower into this mornings open. Expected Ranges AUD/USD: 0.7280 - 0.7420 ▲AUD/EUR: 0.6080 - 0.6230 ▼GBP/AUD: 1.7920 - 1.8280 ▼AUD/NZD: 1.0880 - 1.1050 ▲AUD/CAD: 0.9580 - 0.9680 ▼

  • Australian dollar hits highest level since December 2018
    on August 31, 2020 at 12:00 am

    AUD - Australian Dollar The Australian dollar is stronger this morning when valued against the Greenback reaching a high on Friday of 0.7366. A level that was last seen in December 2018 on the back of overall Greenback weakness and a surge in commodity prices. On Friday we saw the release of the Fed Chair Jerome Powell’s speech at the Jackson Hole Monetary Policy Symposium, where Powell said the U.S. central bank would seek to keep inflation at 2%, on average, so that periods of too-low inflation would likely be followed by an effort to lift inflation above 2% for some time. Looking ahead this week, on Tuesday the Reserve Bank of Australia (RBA) will meet. The official cash rate is expected to remain at 0.25% however all attentions will turn to the RBA Rate Statement, which is focused on the future outlook. On Wednesday the Australian Bureau of Statistics will release the quarterly Gross Domestic Product (GDP) figures, which is forecast to be down -6.0%. On Thursday we will see the release of the monthly Trade Balance figures. Finally on Friday we will see the release of the monthly Retail Sales data, the primary gauge of consumer spending. From a technical perspective, the AUD/USD pair is currently trading at 0.7362. We continue to expect support to hold on moves approaching 0.7325, while now any upward push will likely meet resistance around 0.7400. Key Movers On Friday the greenback resumed its slide against a basket of major currencies in the wake of Fed Chair Jerome Powell’s remarks at the virtual Jackson Hole conference. U.S Fed Chair Jerome Powell said the U.S. central bank would seek to keep inflation at 2%, on average, so that periods of too-low inflation would likely be followed by an effort to lift inflation above 2% for some time. Over the last week we have seen both the dovish Federal Reserve policy and a sluggish U.S. economic recovery have accelerated the weakness in the Greenback. On the data front on Friday we saw the release of July Personal Spending and Personal Income, which increased by 0.4% and 1.9% respectively, while PCE inflation in the same month rose to 1.3% YoY, better than the 1.2% forecast. Looking ahead this week in the United States and on Thursday we will see the release of monthly Trade Balance figures. On Friday all eyes will be on the Employment figures, with the forecast for unemployment rate to come in at 9.8% down from previous 10.2% the previous month. Expected Ranges AUD/USD: 0.7250 - 0.7450 ▲AUD/EUR: 0.6080 - 0.6280 ▲GBP/AUD: 1.7980 - 1.8320 ▼AUD/NZD: 1.0830 - 1.1030 ▼AUD/CAD: 0.9550 - 0.9750 ▲

  • AUD spikes as fed adjusts its inflation management
    on August 28, 2020 at 12:00 am

    AUD - Australian Dollar The Australian dollar drifted sideways throughout domestic trade on Thursday before bouncing through resistance and testing a break above 0.73 overnight. Direction across currency markets was largely muted in the lead up to Fed Chair Jerome Powell’s speech at the Jackson Hole Monetary Policy Symposium, as investors waited to see if the Fed would commit to further monetary policy stimulus measures. As was expected, Powell confirmed policy makers would seek to achieve an average inflation target of 2%, moving away from a fixed target and allowing periods of higher inflation to be offset by periods of low inflation. The decision allows the Bank to keep interest rates near zero for longer, opening the door to further deterioration in yield comparisons. The AUD immediately jumped through resistance at 0.7260 to touch intraday highs at 0.7291, before drifting lower into this morning’s open. After the knee jerk response investors then chased the US dollar higher as proactive monetary policy aimed to drive activity and underpin employment continues to find support in the current market. Despite the immediate correction, the aggressive monetary policy adjustment will be a negative for the USD in the long-term. Having broken resistance, the door is now open for the AUD to extend gains and push toward 0.75 US cents leading into the end of the year. Key Movers The US dollar edged higher this morning despite confirmation from the US Federal Reserve it will amend its inflation management system, effectively keeping interest rates lower for longer. Having moved away from a fixed inflation target, the Fed has greater scope to absorb periods of higher inflation, offsetting increases in prices against periods of lower inflation. The move would normally be a negative for the dollar and while the initial response saw the world base currency sink sharply, investors made an abrupt about face turn and chased the dollar higher. Positive, proactive policy setting designed to drive activity and underpin employment continues to find value in the current market as investors seek assurances governments and central banks will do whatever it takes to guide the global economy through the COVID-19 crisis. The dollar index closed 0.2% higher on the day breaking back through 93. Despite the short term support we expect the policy change will act as a drag on the US dollar. If the Fed is able to absorb price pressures and leave rates on hold near zero for longer, a greater disparity in yields will emerge as other central banks begin to show signs of tightening policy. Expected Ranges AUD/USD: 0.7130 - 0.7290 ▲AUD/EUR: 0.6020 - 0.6180 ▲GBP/AUD: 1.7980 - 1.8320 ▼AUD/NZD: 1.0880 - 1.1050 ▼AUD/CAD: 0.9450 - 0.9580 ▼

  • Weekly market wrap-up
    on April 29, 2019 at 12:00 am

    Australian Consumer Price Index for Q1/19 came in weaker than expected, falling well below the RBA’s 2-3% target range. The AUD dropped temporarily below the important 0.70 level but then managed to bounce back. The pace of inflation has weakened noticeably which is adding to the case for easier monetary policy. This is making the RBA meeting on the 7th May and RBA Statement on Monetary Policy on the 10th a lively event to keep a look out for. Oil rallied on the news that the US would not renew its oil sanction waivers that allow countries to buy Iranian oil for 5 nations which included China, India, Japan, South Korea and Turkey. Currencies of oil importing nations such as INR and TRY suffered on the headline while currencies of exporting oil nations such as CAD and NOK strengthened. On Friday, Oil futures dropped 2.9% following mixed Headlines from Russia and US leaders. The BoC left rates unchanged at 1.75% for the fourth time, as expected, maintaining its dovish tone as the economy faces a slowdown. Their GDP outlook for 2019 dropped to 1.2% from 1.7%, and to around 2% in 2020. USDCAD spiked to 1.3522 at the release of the headline. Governor Poloz afterwards emphasised patience and reiterated that the next move in rates is likely to be a hike than a cut, which help the USDSCAD fall back below the 1.35 handle. Strong US data propelled the Greenback to increase +0.7% versus the Euro and the Loonie, +0.6% versus the Sterling, and +1.5% versus the Aussie dollar. US domestic GDP came in at 3.2%, when the expectation was 2.6%. Additional data showed that the number of Americans filing for unemployment benefits fell to its lowest level in almost 50 years. Furthermore, the Core Durable Goods Orders rose by the most in eight months in March, showing surprising strength. The USD Index lost some ground at the end of the week as market participants realised that 1.7% of the 3.2% GDP increase came from inventory accumulation and net exports (sparked by a big -3.7% drop in imports). Japan’s Industrial production shrank at its fastest level since 2015, slipping 0.9% on the month for March as exports slumped. This is a leading indicator for GDP which probably shrank in the first quarter. Governor Haruhiko Kuroda launched a radical program to reflate prices nine years ago, however, the BOJ now projects that it won't accomplish its 2 percent inflation target at least through March 2022. The Japanese Yen was the best performer within the major currencies last week; it rallied 0.3 percent versus the US dollar and 1.8 percent versus the Aussie dollar.